The Polish CBD sector is beset by ambiguous and confusing regulation backed by uneven enforcement – but it does benefit from a reduced rate of VAT, below even that of prescription medical cannabis. Stakeholders report sales growth in the domestic market but complain of differing treatment for CBD in different product categories, and uneven enforcement.
State regulation hurdles
Food products containing CBD suffer due to EU novel food guidance – as is the case in many European countries. However, numerous products are widely available, such as CBD oils. Due to byzantine Polish tax laws, these are considered to be the same as cooking oils and margarines, and therefore subject to a 5% VAT rate.
Poznań-based India Cosmetics, for example, makes a wide range of CBD products in its two production facilities and laboratory. This includes CBD oils, CBD facial masks and hemp tea with CBD. It told CBD-Intel that last year it attempted to clarify its tax liability through an individual tax interpretation from state authorities.
The Statistical Office in Łódź told the company that “cannabis oil made from cannabis seeds with an addition of plant extract (Cannabidiol)” is subject to the same VAT rate as “margarine and similar fats, edible”.
Ironically, Polish CBD companies must sell their CBD oils – classified as edible for VAT purposes – as not for human consumption to avoid novel food enforcement. If a company such as India Cosmetics were to sell that same oil as a cosmetic product, the VAT rate would be 23%, Przemysław Jakubowski, president of the company’s management board, told CBD-Intel.
Similarly, due to legal complexities, while Polish authorities permit a reduced VAT rate to CBD oils, they apply a standard 23% rate to medical cannabis – amid industry protests.
Earlier this year, Canada’s Spectrum Therapeutics became the first business to launch sales of medical cannabis in the Polish market. The first batch of about 7kg was sold within hours, and by the end of 2019 the company planned to significantly boost its sales in Poland. Given the market’s rapid development, Spectrum Therapeutics thinks it could import as much as 100kg of medical cannabis to Poland from its production facility in Denmark, the company’s Tomasz Witkowski told CBD-Intel.
However, since it finds itself facing 23% VAT, it must price products at PLN 65 (€15.30/£13.73). It believes this too high and is reportedly in talks with Poland’s tax authorities in hope of reducing the applicable tax rate to 8%. The company’s efforts reflect how regulatory uncertainty exerts an impact on the sector’s activities in Poland.
Under the Polish medical cannabis scheme, patients must pay the full price, which is not refundable – meaning some find it hard to finance. This is potentially a boon for consumer CBD stakeholders, though in all probability an exceedingly minor source of extra business in the grand scheme of things.
When asked about the authorities’ current policy of applying a 5% tax rate to CBD oils and a 23% rate to medical cannabis, Witkowski said Spectrum Therapeutics was considering further legal steps to lead to a decrease in the applied VAT rate in Poland.
“The tax authorities decided that our product does not fulfil the conditions to be subject to a reduced VAT rate only because it is a pharmaceutical raw material,” he said. “However, in their jurisprudence, administrative courts maintain that, on the grounds of the [Polish] pharmaceutical law, medical products exist in both a broad and narrow sense, and in the broad sense, pharmaceutical materials are also considered as medical products.”
While fiscal uncertainty remains a major source of concern to the country’s CBD industry, local observers say the lack of coordination between state institutions and potential abuses of power exert an even higher toll on Polish producers and distributors.
Local reports say the Chief Sanitary Inspectorate and the police have intensified their enforcement activities lately on retail stores that sell CBD products.
One news report says: “The administrative procedures used by law enforcement bodies are arranged in the following patterns: if CBD is found in any [food or beverage] product, it is classified as ‘novel food’, which requires a special permit.
“From the situations described by the owners of the stores, the intention of the authorities is to destroy the products or keep them until they expire. The result of such actions could be hemp products being pushed into a ‘grey zone’ where the mechanism of their purchase will resemble the purchase of illegal substances.” More than 20 Polish CBD stores are believed to have reported having stocked seized in such incidents.
CBD-Intel (www.CBD-Intel.com) provides impartial, independent and premium market and regulatory analysis, legal tracking, and quantitative data for the cannabidiol (CBD) sector, focusing on non-US markets.